COVID-19: Mitigating the impact in the High Tech industry

April 8, 2020

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COVID-19 is a global health crisis whose scale and speed are unprecedented in recent history. Companies should act now to protect their people and ensure business continuity. High tech firms will likely need to evaluate impacts on three fronts: supply chain, market demand and employees. High tech leaders should balance preparing for the short-term while also developing new capabilities and ways of working that will change how they operate in mid- and long-term.

High tech is well positioned to ride out the crisis

In the short-term, supply disruption will reduce manufacturing and assembly capacity, plant reopenings will be further delayed by lags in component supply, and travel bans will exacerbate workforce shortages and consumer demand. The good news is High tech companies are set up for remote work more than other industries and so will suffer less of a workplace culture shock.

The shift to working from home with the help of digital collaboration tools is likely to drive demand for High tech in many categories. A growing need for infrastructure to support this shift, like cloud computing for business or increased broadband consumption for consumers, will be a boon to the industry.

Demand impact will differ across high tech sectors

Each subsector and link in the value chain will face its own challenges.

Semiconductors

Short-term effects are concerning with the auto sector and consumer devices expected to see negative growth in 2020 However, increases in cloud computing and work-from-home technology will drive demand for chips in PC and servers. Increase in long-term demand driven by greater adoption of cloud and mobility solutions.

Enterprise technology

The need for work-from-home solutions will drive increased demand for laptops, routers, and cloud computing solutions, but larger program purchases will likely decline in the near-term. Long-term forecasts for enterprise technology are unlikely to change dramatically.

Consumer technology

Recession fears and discretionary income reduction will reduce overall spending while there are positive signs in personal computing purchases in the near-term. Pent-up consumer demand will be released after the crisis, meaning long-term demand forecasts should experience minimal change.

Communications and network equipment

While 5G and other network upgrades will be deferred in the near-term until supply chains and field workforces are back in place, network investment will continue to support increased cloud and mobile usage. Network infrastructure spend will increase in the long-term to support home-based work and entertainment demand.

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Within these distinct categories, each supply chain is unique. To get a detailed picture, companies have to look at the way their components, products and services, and customers will each be affected.

Suppliers

The High Tech supply chain is heavily dependent on China, which experienced major disruptions at the beginning of the year, but is now mainly recovered. However, specific supplier episodic supply challenges will continue to occur as different regions and countries phase through COVID-19's infection cycle. This will result in competition for available supplies and higher costs will be passed on to customers.

Manufacturers

May be forced to reduce output because of labor issues and intellectual property restrictions that keep production in certain countries, some of which may be shut down due to the virus.

Logistics

Even in the last mile, logistics will be hampered by a welter of border closings and legal restrictions, with shuttered sales venues lacking either staff to sell or customers to sell to. The need to deliver direct to customer will increase.

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Acting fast in a crisis

Many leaders must provide for the short-term while developing new capabilities and ways of working that will endure. One of the best ways to prepare for any future challenge is to develop an Elastic Digital Workforce, an extendable workplace environment that allows you to quickly scale and adapt to changing business needs.

Putting the right tools in place: If the right tools for remote work are not already in place, leaders, in collaboration with IT, should ensure that all employees have access to, as well as the ability or proper training to use, these tools. And, they could push for universal adoption and model their use. Business continuity plans should account for the Elastic capacity of a digitally enabled workforce, as well as potential reductions in workforce and travel.

Culture powers the transition: Powered by a strong culture, organizations can set about strengthening or replacing every aspect of their technology that could support an Elastic Digital Workforce, such as distributing the right equipment to employees. Networks that connect devices to homes where workers and customers reside must be shored up, and security protections for data flowing over those networks must be assured.

Some institutions around the world have been overwhelmed by the speed at which the novel coronavirus travels. Major commercial hubs in Asia, Europe and North America have seen or will see their local governments and health care facilities struggle to meet capacity for new demand.

The same will likely be true of businesses. Acting quickly helps to weaken the impact of COVID-19 on your business. In fact, the positive effects of a transformation to an Elastic Digital Workforce can be felt quickly.

Coronavirus & high tech: Planning for the future

Triage & prioritize [2 weeks]

For the next two weeks, focus on assessment. Understand how exposed your supply chains may be to risk, model scenarios for changes in both demand and supply, try to find unaffected pockets of demand that can factor into your strategy and see what capabilities are already in place to enable an Elastic Digital Workforce.

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Supply Chain

'War room' mindset

Understand and quantify exposure

Triage and address shortages across the supply network.

Scenario-model volatility

Demand

Scenario-model different demand volumes and ‘stress test’ business model

Elastic Workforce

Sense & reconfigure [2+ months]

Over the next two months, identify what might be different about the reality of the situation and reconfigure your response as necessary. Ask yourself: have new opportunities arisen to redesign your network and inventory flow? Have you uncovered insights that will help you improve demand planning for the short- and long-term? Have you deployed new ways of working at all levels of the company?

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Supply Chain

Dynamic sourcing and inventory

AI/ML supply and demand planning

Improve longer term supply and demand stability

Assess and re-design network and inventory flow paths

Demand

AI-supported cash & working capital management

Improve demand planning and scenario modelling capabilities

Data-driven demand segmentation

Elastic Workforce

Deploy current and new technologies to support elastic workforce

Execute new ways of working and collaboration at all levels of company

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Scale and maintain [6 months+]

Six months from now, think about making more lasting changes, like diversifying your supply chain to increase resilience in the face of future disruptions, using AI to predict changing demand, and making the best parts of remote work a permanent part of your culture.

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Supply Chain

Diversify supply chain to mitigate dependencies on specific countries

Enable more Direct to Consumer business models and sales

Invest in digital supply chain and smart manufacturing capabilities

Demand

Shift business model to ‘as a service’ to mitigate demand volatility

Expand into new Work-From Home, Med Tech and collaboration solutions

Make investments in digital and AI-driven demand sensing and planning capabilities

Elastic Workforce

Permanently change ways of collaborating and working

Create a more elastic workforce, especially in field services and customer support

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COVID-19 has been called a once-in-a-century event. In its wake, we are likely to see a lasting shift in employee expectations, a greater capacity to respond to sudden, global disruptions, an accelerated adoption of artificial intelligence and automation, and more automated and diverse supply chains.

High tech companies that invest now in creating an Elastic Digital Workforce will be much more prepared for a post-COVID-19 world.

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